Social Enterprises

What is a Social Enterprise?  What is the difference between a Social Enterprise and a Not for Profit?

There is some confusion about the meaning of “Social Enterprise”.  A Social Enterprise is a commercial enterprise with a social purpose that can make a profit or surplus and reinvests that surplus to increase the impact of its activities.  Because “profit” is almost a dirty word in some circles some people feel that socially focused organisations should not actually make a profit.  The term “Not For Profit” implies that an organisation does not make any profit or surplus above the costs to deliver the service or goods provided.  However to be sustainable the organisation must make some surplus. It is important to understand that people working in these organisations should be paid normal wages and salaries with standard conditions as they apply to all working people.   It is also important that these businesses have some cash reserves or equity to provide for short term problems with cash flow.  So even a “Not For Profit” should aim to make a profit!

The reality is that Social Enterprises offer a wonderful way to allow people to work for social good as well as provide essential goods and services.   Social Enterprises operate in a commercial way the same as any other corporate organisation. The main difference is that profits are reinvested back into the business to augment the attainment / impact of the social mission they serve. The expectation is that a mature SE is independently commercially viable with limited (ie <30% ) funding via grants and philanthropic.  In a successful SE the grants and philanthropic funding is mainly used for special projects and scaling up.

It is possibly more useful to describe such businesses as “For Purpose” rather than “Not For Profit”.    A simple and successful example of a Social Enterprise would be Streat or Society Melbourne,  where a restaurant or café is established to employ unemployed or disadvantaged people and give a pathway to future employment. Customers are happy to frequent such venues because they pay similar prices but get a good feeling from supporting a socially supportive organisation. There are endless possibilities to support the community and improve our social well-being through commercial activities that focus on positive social impact. Another major benefit is that people working in these organisations have much greater sense of purpose and achievement.

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